This seems like a good idea. The way I understand it, the bank’s financials are loaded into computer models where different scenarios are played out to gauge the real health of an institution.
While it may throw fuel on the fire in the short-term for some banks, it could uncover some of the underlying problems that need to get fixed for the long term.
Or, is it a terrible idea because the problems are so widespread that bad news of that magnitude could be catastrophic?
http://online.wsj.com/article/SB123420518851764681.html
“The move could address disagreements between bank regulators about the viability of scores of institutions. Regulators have struggled to come up with a common set of criteria for deciding which banks should receive money. Setting up a stress test could create a more objective set of standards, which might reveal the depths of the industry’s problems.
Banks have complained that the process for applying for bailout funds is arbitrary. At least two that applied, National Bank of Commerce in Illinois and County Bank in California, were denied by the government and failed. Research firm RBC Capital Markets estimated Monday that more than 1,000 banks could fail in the next three to five years, more than triple its previous estimates.”